The biggest and best tax reforms in 25 years just passed the Parliament.

In fact, you would have to go back way before the noughties to find tax reforms that will make Australia fairer than Labor’s reforms passed this week with the support of the Greens and David Pocock in the Senate.

Most tax reforms passed in the last 25 years have been either tweaks, regressive (penalising poorer people or helping the rich), or have been repealed. More on that later.

Labor’s tax reforms are progressive, and the most talked about reforms are the ones that will affect housing. Finance journalist Alan Kohler neatly summarised Australia’s housing crisis this way: “It’s no longer possible for somebody who doesn’t have reasonably wealthy parents to buy a house. It’s as simple as that. And it’s a fundamental change to Australian society.”

That’s the problem Labor is targeting with these reforms.

It used to be that house prices increased at roughly the same rate as incomes. Then in 1999, John Howard introduced the 50 per cent capital gains tax (CGT) discount and together with negative gearing, it fundamentally distorted Australia’s housing market. Housing went from being the family home to a financial asset. The tax concessions favoured investors, who flooded into the market, out-competing owner-occupiers, and house prices started increasing at double the rate of wages. Thanks John Howard.

Not only did these two tax concessions make housing unaffordable, they also cost taxpayers an absolute bomb and they massively benefited the very highest income earners at the expense of nurses, teachers, hairdressers and panel beaters.

Recent Parliamentary Budget Office figures show that more than 80 per cent of the CGT discount goes to the top 10 per cent of income earners. Almost 60 per cent of the benefit goes to the top 1 per cent (those who earn more than $362,900). That’s roughly $13 billion a year, that was benefiting just the top 1 per cent of income earners in Australia. It was completely unfair.

The Greens wanted to go further, including removing much of the bill’s grandfathering, but ultimately passed Labor’s legislation that will see the capital gains tax change from a 50 per cent discount (after holding for 12 months) to a discount based on inflation (similar to the system Australia had before 1999). Negative gearing will be limited to new build housing only, to encourage housing supply, with some grandfathering provisions.

And there is now a minimum 30 per cent tax rate on capital gains. Before this legislation passed, a cleaner working full time on the minimum wage of about $50,000 would pay a tax rate of 32 per cent on any income from extra shifts they decide to pick up. Whereas a bank executive who makes a $400,000 profit (i.e. a capital gain) when selling their investment property would end up paying a much lower 23.5 per cent tax rate on that $400,000 passive income, thanks to the CGT discount.

These reforms preserve the key principle of our progressive income tax system: the bigger your capacity to pay, the bigger the share of your income you should pay.

The last major progressive tax reforms might be the introduction of capital gains tax itself and fringe benefits tax all the way back in the mid-1980s. But for the last two decades, tax reforms have been regressive, disproportionately affecting those on low wages, like the GST. A retail worker earning minimum wage pays a higher proportion of their income on GST than a chief executive officer, for example.

Other major tax reforms like the mining tax and the carbon price – which successfully reduced pollution while jobs and the economy grew- were repealed.

Labor’s changes to trusts have not yet passed. This would see a 30 per cent minimum tax on discretionary trusts (also known as “family trusts”). Like the CGT discount, discretionary trusts overwhelmingly benefit the richest Australians. Australia Institute research shows that the number of trusts has almost tripled in the last 30 years. There are now more than 1 million trusts with combined assets of $2.9 trillion – that’s trillion with a “t”- and annual income of $601 billion. That means revenue worth roughly the same as a quarter of the whole Australian economy now flows through some form of trust.

But there is much more tax reform Australia could introduce to give a fair go to more people.

Globally, billionaires regularly pay a lower rate of tax than workers and, despite these progressive tax reforms, Australia still taxes wealth very lightly. Extreme wealth buys extreme power, including political influence. Introducing a minimum unavoidable tax on wealth for the super-rich is not only a sensible idea, it’s an investment in protecting Australia as a stable democracy with a strong social safety net.

Australia also desperately needs a 25 per cent gas export tax, which would raise around $17 billion in revenue each year and make domestic gas and electricity prices cheaper for families and businesses. Perversely, the Japanese government has collected more tax from Australia’s gas exports than the Australian government has.

Around 80 per cent of Australia’s gas is exported and we can only sell and tax it once. After that it’s gone forever. Australia has forgone over $72 billion in revenue since the Albanese government elected by not imposing a 25 per cent gas export tax, that’s enough to pay for free childcare, or university and TAFE.

As prime minister, John Howard ushered in the regressive GST and tax reforms that made owning a home unaffordable for a whole generation. Prime Minister Anthony Albanese and Treasurer Jim Chalmers have now successfully passed two rounds of serious tax reforms that make things easier for those who are struggling. First, making the stage three income tax cuts fairer, backed strongly by the public. Now, Labor is shifting the balance from taxing work – how most Australians earn a crust – towards taxing wealth. It’s a great start, but with so many people struggling to make ends meet, it can’t be the end. Progressive tax reforms make Australia fundamentally a fairer place for everyone, and they will pay democratic dividends for generations of Australians in the years to come.

This article originally appeared in The Canberra Times.